Joe McHugh (Donegal North East, Fine Gael)

I congratulate the Labour Party for putting the motion, the timing of which is of critical importance. The stark reality in the services, retail and manufacturing sectors is that people are struggling. Despite the bad weather, discussion on the economy and the credit crunch is taking precedence over the weather, such is the critical nature of matters. People are losing their jobs and businesses are unable to cope with the continued increases in costs. There are competition factors also. I am a Deputy representing an area on the Border, where there is an uncompetitive playing pitch, which will drive business to the wall in the coming months if nothing is done.

It is very important to remain in the real world. I have listened to the contributions of the Minister of State, Deputy Kelleher, and the Minister for Finance, Deputy Lenihan. They contained fancy jargon and buzz words. It does not mean anything to the person who lost his job in the last two weeks and who I met in my office last Friday. He pays €1,700 per month on his mortgage, and he has to set aside his children's allowance to pay for some of it and then figure out where to come up with the rest. That is the stark reality facing the people of this country.

I know this is not a motion on unemployment, so I will try to stick to the issue of small and medium enterprises. Last Saturday morning, the biggest retail store in Newry could not provide customers with trolleys. By 10.30 a.m. that business was faced with the choice of closing its doors. The manager of that store is expected to be under even greater pressure next Saturday. However, in the three Ulster counties on this side of the Border, there were stores faced with the prospect of closing their doors because they had no customers. It is not good for business in the Border areas outside of the Six Counties. There are swings and roundabouts, and petrol and diesel go up and down on either side of the Border. However, the commitment by the UK Government to reduce VAT to 15% is going to wipe out businesses over the Christmas period, because it provides an uncompetitive advantage.

We must face the reality that there are two separate currencies. However, we have bought into a democratic process under the Good Friday Agreement. In 1998, the Government led the Irish Republic into the Good Friday Agreement. Bertie Ahern, together with many colleagues who serve in the Cabinet today, sought and received from Northern unionism and the British Government a commitment to develop co-operation and action within the island of Ireland. That included everything from marine integration to transport integration, but the commitment was underpinned by the democratic decision of the people who voted for the Good Friday Agreement on both sides of the Border.

Part of the document envisages the integration of the Border economy with the economy of Northern Ireland. It also recognises the regional significance of Belfast to the province of Ulster, which obviously includes Donegal, Cavan and Monaghan. It acknowledges the importance of the fourth largest city on this island, namely, Derry city, as the critical hub for the north west of the Irish Republic. Under the regulatory, environmental and fiscal measures, and under the subheading of fiscal instruments, taxation is described as an important factor in economic competitiveness. Achieving the right balance between competitive taxes and the adequate provision of public goods is a challenge faced by both Governments. There must be co-ordinated policy intervention, including intervention to generate and improve the regulatory environment, including the use of fiscal measures. Companies should also be encouraged to redesign logistical strategies and treat Ireland as one commercial zone, rather than two separate entities. The two Governments are proceeding on the basis that any strategy should be cost effective, to the benefit of the producers for the citizens, and should be greater than the costs it will impose on the taxpayer.

Did the Minister for Finance discuss with the Chancellor of the Exchequer the financial ramifications of their diverging fiscal strategies for the province of Ulster? As far as I am concerned, the answer is "No". I accuse the North-South Ministerial Council of not following up on the democratic mandate given by people on both sides of the Border. There has been a laissez faire attitude to Northern Ireland on the pretence that everything is sorted. The Fianna Fáil Party wanted to create an alignment with the SDLP out of pure selfishness, which is the only movement it has made in the last four or five years. Since the Good Friday Agreement was signed, 83 peace walls have been erected. People in business are losing out seeing others cross the Border. We have created a critical problem in the Border areas that needs attention. The Minister for Finance should pick up the phone and explain to the British Chancellor of the Exchequer why we have a VAT rate that is 6% higher than in Britain.

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